Drugs companies have lost far more than their health

 

By John Kay
Published: February 8 2011 23:03 | Last updated: February 8 2011 23:03

Pfizer's decision to close its research laboratory at Sandwich is widely seen as a setback for recovery in Britain, a country that played a leading role in the development of the modern research-based pharmaceutical industry. In the last century, high profitability characterised the industry, founded on blockbuster drugs that would typically relieve, but not cure, the ill-effects of affluence – depression, hypertension, stomach acidity and arterial degeneration.
George Merck, president of the eponymous company from 1925 to 1950, famously expressed his corporate philosophy: "We try never to forget that medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear. The better we have remembered it, the larger they have been." For many years Merck topped Fortune magazine's list of most admired companies. Johnson & Johnson's 308-word credo captures similar sentiments. In a classic business school case on ethics and corporate reputation, the company's executives applied the credo to implement a speedy product recall.
The drugs industry has thus had an implicit contract with public and government. It was permitted extraordinary profitability in return for companies behaving as exemplary corporate citizens.
Pfizer was always an odd man out. While Merck was lecturing doctors on his commitment to social responsibility, John McKeen, his Pfizer counterpart, was assuring his shareholders: "So far as humanly possible, we aim to get profit out of everything we do." In a 1994 business book by Jim Collins and Jerry Porras, Built to Last, Pfizer is Merck's ugly sister. More assertive but less profitable, it epitomised the profit-seeking paradox – the most profitable companies are not the most aggressive in pursuit of profit.
But in the 1990s the supply of new blockbuster drugs diminished. Perhaps the low-hanging fruit had been picked, while able scientists from the academic world could more easily access venture capital to do their own thing. The industry was criticised for its focus on the minor ailments of the rich rather than the life-threatening diseases of the poor. Drug companies came under pressure from Wall Street to demonstrate commitment to shareholder value. The pay-off from marketing is immediate, the pay-off from research delayed, and their strategy reflected that. They also spent a great deal on buying each other. The greatest modern achievement of pharmacology – the cocktail of drugs that controls Aids, with public research leading the way – may be a model for future innovation.
As Pfizer jumped ahead in this environment, Merck stumbled – it would feature again in Mr Collins's 2009 book, How the Mighty Fall. A new blockbuster painkiller, Vioxx, was promoted not just for the minority of patients who derived a unique benefit but for many who might as well have taken an aspirin. Merck withdrew the product amid recrimination and lawsuits. Even the revered J&J would find its reputation tarnished by the regulator's discovery of bad practice – and dubious management responses – at the company's McNeil consumer products group.
An industry that once seemed to exemplify a constructive relationship between private enterprise and public benefit is now widely detested. US customers face spiralling drug costs. Development groups believe the industry's contribution to the world's poor is grudging and inadequate. Medical professionals view its ethics with mistrust. Its response has been a lobbying effort rivalled only by that of the financial services industry.
Such lobbying may delay, but not ultimately prevent, reversion to profit margins that reflect the new nature of the industry in returns appropriate to consumer products rather than innovative research. The future of pharmacology will probably look more like the peer-reviewed open process of incremental development based on public and philanthropic funding found elsewhere in medical science.
Pfizer has decided to attempt to meet its earnings growth targets – the patent on its popular cholesterol drug, Lipitor, is about to expire – by cutting its research budget, correctly observing that its productivity has declined. Rival Merck, in contrast, has lowered earnings projections to maintain research spending. The market's immediate verdict was that Pfizer was right. For its shareholders, perhaps. When an industry model is broken, the best business strategy may be to manage its decline.

Attracting the fleeing Arab rich - UK entry rules set to be relaxed for the super-rich

 

By Alice Ross and Elizabeth Rigby
Published: February 6 2011 22:36 | Last updated: February 6 2011 22:36

Multimillionaire foreigners prepared to invest their money in Britain will find it easier to make a home in the UK under government plans to relax immigration rules for the ­super-rich.

The Home Office will shortly propose changes to "investor visas" to encourage more rich people to live and invest in the UK.

The move comes as the government slashes foreign student numbers in an attempt to reduce yearly net migration to the "tens of thousands" – to the anger of universities reliant on income from overseas students.

The coalition has also cut the number of skilled workers British business can import from outside the European Union by one-fifth compared with last year. In addition, only 1,000 highly skilled workers without a job offer will be allowed to migrate to the UK, compared with 14,000 a year ago.

Under the proposals, which must be endorsed by parliament, wealthy migrants will from April only have to spend half a year in the country – against nine months under current rules – to qualify for a visa, and the wait for permanent residency will be dramatically cut for the wealthiest entrants.
The government, which has already exempted "high net worth individuals" and entrepreneurs from the new cap on non-European migration, is determined to increase the flow of wealthy immigrants. The UK attracts only a few hundred individuals each year on such grounds, compared with 3,000 for Canada.

Under the proposals, investors bringing in £10m would qualify for permanent residency within two years. Individuals with at least £5m would qualify in three and those with £1m would qualify after five years. At present, anyone on an investor visa has to stay at least five years before being eligible.
One Whitehall insider said the incentives represented an obvious effort to bolster the economy, although those granted permanent residency would then be free to take their money out of the UK.
Julia Onslow-Cole, head of global immigration at PwC Legal, said the changes "should encourage ... high net worth families to move to the UK". She added: "We have already seen significant interest in this new route from our clients."

Those applying for an entrepreneur visa would also see restrictions eased. It is expected businesses will be allowed to bring in an extra employee from overseas in return for an additional investment of £50,000.

The relaxed rules might attract foreign nationals from politically unstable countries. Maurice Turnor Gardner, a law firm, said it had been contacted in the past fortnight by several Egyptian families wanting to apply for investor visas.

Its Asian prosperity that's undermined dysfunctional Arab states

 Food and failed Arab states
By Spengler

Even Islamists have to eat. It is unclear whether President Hosni Mubarak of Egypt will survive, or whether his nationalist regime will be replaced by an Islamist, democratic, or authoritarian state. What is certain is that it will be a failed state. Amid the speculation about the shape of Arab politics to come, a handful of observers, for example economist Nourel Roubini, have pointed to the obvious: Wheat prices have almost doubled in the past year.

Egypt is the world's largest wheat importer, beholden to foreign providers for nearly half its total food consumption. Half of Egyptians live on less than $2 a day. Food comprises almost half the country's consumer price index, and much more than half of spending for the poorer half of the country. This will get worse, not better.

Not the destitute, to be sure, but the aspiring and frustrated young, confronted the riot police and army on the streets of Egyptian cities last week. The uprising in Egypt and Tunisia were not food riots; only in Jordan have demonstrators made food the main issue. Rather, the jump in food prices was the wheat-stalk that broke the camel's back. The regime's weakness, in turn, reflects the dysfunctional character of the country. 35% of all Egyptians, and 45% of Egyptian women can't read.

Nine out of ten Egyptian women suffer genital mutilation. US President Barack Obama said Jan. 29, "The right to peaceful assembly and association, the right to free speech, and the ability to determine their own destiny … are human rights. And the United States will stand up for them everywhere." Does Obama think that genital mutilation is a human rights violation? To expect Egypt to leap from the intimate violence of traditional society to the full rights of a modern democracy seems whimsical.

In fact, the vast majority of Egyptians has practiced civil disobedience against the Mubarak regime for years. The Mubarak government announced a "complete" ban on genital mutilation in 2007, the second time it has done so - without success, for the Egyptian population ignored the enlightened pronouncements of its government. Do Western liberals cheer at this quiet revolt against Mubarak's authority?

Suzanne Mubarak, Egypt's First Lady, continues to campaign against the practice, which she has denounced as "physical and psychological violence against children." Last May 1, she appeared at Aswan City alongside the provincial governor and other local officials to declare the province free of it. And on October 28, Mrs Mubarak inaugurated an African conference on stopping genital mutilation.

The most authoritative Egyptian Muslim scholars continue to recommend genital mutilation. Writing on the web site IslamOnline, Sheikh Yusuf al-Qaradawi - the president of the International Association of Muslim Scholars - explains:

The most moderate opinion and the most likely one to be correct is in favor of practicing circumcision in the moderate Islamic way indicated in some of the Prophet's hadiths - even though such hadiths are not confirmed to be authentic. It is reported that the Prophet (peace and blessings be upon him) said to a midwife: "Reduce the size of the clitoris but do not exceed the limit, for that is better for her health and is preferred by husbands."

That is not a Muslim view (the practice is rare in Turkey, Iraq, Iran and Pakistan), but an Egyptian Muslim view. In the most fundamental matters, President and Mrs Mubarak are incomparably more enlightened than the Egyptian public. Three-quarters of acts of genital mutilation in Egypt are executed by physicians.

What does that say about the character of the country's middle class? Only one news dispatch among the tens of thousands occasioned by the uprising mentions the subject; the New York Times, with its inimitable capacity to obscure content, wrote on January 27, "To the extent that Mr. Mubarak has been willing to tolerate reforms, the cable said, it has been in areas not related to public security or stability.

For example, he has given his wife latitude to campaign for women's rights and against practices like female genital mutilation and child labor, which are sanctioned by some conservative Islamic groups." The authors, Mark Landler and Andrew Lehren, do not mention that 90% or more of Egyptian women have been so mutilated. What does a country have to do to shock the New York Times? Eat babies boiled?

Young Tunisians and Egyptians want jobs. But (via Brian Murphy at the Associated Press on January 29) "many people have degrees but they do not have the skill set," Masood Ahmed, director of the Middle East and Asia department of the International Monetary Fund, said earlier this week. "The scarce resource is talent," agreed Omar Alghanim, a prominent Gulf businessman. The employment pool available in the region "is not at all what's needed in the global economy." For more on this see my January 19 essay, Tunisia's lost generation. There are millions of highly-qualified, skilled and enterprising Arabs, but most of them are working in the US or Europe.

Egypt is wallowing in backwardness, not because the Mubarak regime has suppressed the creative energies of the people, but because the people themselves cling to the most oppressive practices of traditional society. And countries can only languish in backwardness so long before some event makes their position untenable.

Wheat prices 101 and Egyptian instability
In this case, Asian demand has priced food staples out of the Arab budget. As prosperous Asians consume more protein, global demand for grain increases sharply (seven pounds of grain produce one pound of beef). Asians are rich enough, moreover, to pay a much higher price for food whenever prices spike due to temporary supply disruptions, as at the moment.

Egyptians, Jordanians, Tunisians and Yemenis are not. Episodes of privation and even hunger will become more common. The miserable economic performance of all the Arab states, chronicled in the United Nations' Arab Development Reports, has left a large number of Arabs so far behind that they cannot buffer their budget against food price fluctuations.

Earlier this year, after drought prompted Russia to ban wheat exports, Egypt's agriculture minister pledged to raise food production over the next ten years to 75% of consumption, against only 56% in 2009. Local yields are only 18 bushels per acre, compared to 30 to 60 for non-irrigated wheat in the United States, and up 100 bushels for irrigated land.

The trouble isn't long-term food price inflation: wheat has long been one of the world's bargains. The International Monetary Fund's global consumer price index quadrupled in between 1980 and 2010, while the price of wheat, even after the price spike of 2010, only doubled in price. What hurts the poorest countries, though, isn't the long-term price trend, though, but the volatility.

People have drowned in rivers with an average depth of two feet. It turns out that China, not the United States or Israel, presents an existential threat to the Arab world, and through no fault of its own: rising incomes have gentrified the Asian diet, and - more importantly - insulated Asian budgets from food price fluctuations. Economists call this "price elasticity." Americans, for example, will buy the same amount of milk even if the price doubles, although they will stop buying fast food if hamburger prices double. Asians now are wealthy enough to buy all the grain they want.

If wheat output falls, for example, due to drought in Russia and Argentina, prices rise until demand falls. The difference today is that Asian demand for grain will not fall, because Asians are richer than they used to be. Someone has to consume less, and it will be the people at the bottom of the economic ladder, in this case the poorer Arabs.



That is why the volatility of the wheat price (the rolling standard deviation of percentage changes in the price over twelve months) has trended up from about 5% during the 1980s and 1990s to about 15% today. This means that there is a roughly two-thirds likelihood that the monthly change in the wheat price will be less than 15%.

It also means that every so often the wheat price is likely to go through the ceiling, as it did during the past 12 months. To make life intolerable for the Arab poor, the price of wheat does not have to remain high indefinitely; it only has to trade out of their reach once every few years.

And that is precisely what has happened during the past few years:



After 30 years of stability, the price of wheat has had two spikes into the $9 per bushel range at which very poor people begin to go hungry. The problem isn't production. Wheat production has risen steadily - very steadily in fact - and the volatility of global supply has been muted:



The line in Chart 3 above marked "production volatility" is the five-year standard deviation of annual percentage changes in world wheat supply (data from US Department of Agriculture). During the 1960s and 1970s, it hovered around the 3% to 5% range, but fell to the 1% to 3% range.

It shows an approximately two-thirds likelihood that world wheat supply will change by less than 3% each year. Wheat supply dropped by only 2.4% between 2009 and 2010 - and the wheat price doubled. That's because affluent Asians don't care what they pay for grain. Prices depend on what the last (or "marginal") purchaser is willing to pay for an item (what was the price of the last ticket on the last train out of Paris when the Germans marched on June 14, 1940?). Don't blame global warming, unstable weather patterns: wheat supply has been fairly reliable. The problem lies in demand.

Officially, Egypt's unemployment rate is slightly above 9%, the same as America's, but independent studies say that a quarter of men and three-fifths of women are jobless. According to a BBC report, 700,000 university graduates chase 200,000 available jobs.

A number of economists anticipated the crisis. Reinhard Cluse of Union bank of Switzerland told the Financial Times last August:

"Significant hikes in the global price of wheat would present the government with a difficult dilemma.

Do they want to pass on price rises to end consumers, which would reduce Egyptians' purchasing power and might lead to social discontent?

Or do they keep their regulation of prices tight and end up paying higher subsidies for food? In which case the problem would not go away but end up in the government budget.

Egypt's public debt is already high, at roughly 74% of gross domestic produce (GDP), according to UBS. Earlier this year the IMF projected that Egypt's food subsidies would cost the equivalent of 1.1% of GDP in 2009-10, while subsidies for energy were expected to add up to 5.1%.
...
Tensions over food have led to violence in bread queues before and it wouldn't take much of a price rise for the squeeze on many consumers to become unbearably tight."

One parameter to watch closely is the Egyptian pound. Insurance against Egyptian default was the London Interbank Offered Rate (Libor) +3.3% a week ago; on Friday, it stood at Libor + 4.54%. That's not a crisis level, but if banks start reducing exposure, things could get bad fast. In 2009 Egyptian imports were $55 billion against only $29 billion of exports; tourism (about $15 billion in net income) and remittances from Egyptian workers (about $8 billion) and other services brought the current account into balance. Scratch the tourism, and you have a big deficit.

Egypt has $35 billion of central bank reserves, adequate under normal conditions, but thin insulation against capital flight. Foreigners hold $25 billion of Egypt's short-term Treasury bills, for example. It would not take long for a run on the currency to materialize - and if the currency devalues, food and fuel become all the more expensive. A vicious cycle may ensue.

Under the title The Failed Muslim States to Come (Asia Times Online December 16, 2008), I argued that the global financial crisis then at its peak would destabilize the most populous Muslim countries:

Financial crises, like epidemics, kill the unhealthy first. The present crisis is painful for most of the world but deadly for many Muslim countries, and especially so for the most populous ones. Policy makers have not begun to assess the damage. The diplomatic strategy of the industrial nations now resembles a James Clavell potboiler, in which an earthquake interrupts a hopelessly immured plot. Moderate Islam was the El Dorado of the diplomatic consensus.

It might have been the case that Pakistan could be tethered to Western interests, or that Iran could be engaged peacefully, or that Turkey would incubate a moderate form of Islam. I considered all of this delusional, but the truth is that we shall never know. The financial crisis will sort them out first.

I was wrong. It wasn't the financial crisis that undermined dysfunctional Arab states, but Asian prosperity. The Arab poor have been priced out of world markets. There is no solution to Egypt's problems within the horizon of popular expectations. Whether the regime survives or a new one replaces it, the outcome will be a disaster of, well, biblical proportions.

The best thing the United States could do at the moment would be to offer massive emergency food aid to Egypt out of its own stocks, with the understanding that President Mubarak would offer effusive public thanks for American generosity. This is a stopgap, to be sure, but it would pre-empt the likely alternative. Otherwise, the Muslim Brotherhood will preach Islamist socialism to a hungry audience. That also explains why Mubarak just might survive. Even Islamists have to eat. The Iranian Islamists who took power in 1979 had oil wells; Egypt just has hungry mouths. Enlightened despotism based on the army, the one stable institution Egypt possesses, might not be the worst solution.

Those at the nucleus may not have the best view

 

By John Kay
Published: February 1 2011 23:06 | Last updated: February 1 2011 23:06

This year we celebrate the centenary of the discovery by Ernest Rutherford of the nucleus of the atom. Rutherford's work would lead directly to the atomic bomb, nuclear energy and many other events of political and economic, as well as scientific, significance.
Rutherford was professor of physics at Manchester University, and he presented his findings in 1911 to a meeting of the Manchester Literary and Philosophical Society. The audience consisted mainly of local business people. The announcement of one of the most important scientific breakthroughs of the 20th century was preceded by a session in which a Manchester fruit importer exhibited a rare snake he had discovered in a consignment of bananas.
Modern physics is difficult but any good physicist will be pleased to try to explain it. The gift of exposition is not necessarily aligned with intellectual distinction: as a student, I was disappointed to find that the most distinguished of my lecturers, the economist Sir John Hicks, had never mastered how to hold the attention of a class. But clarity of thought and clarity of expression tend to go together. The best textbooks are often written by the best researchers: Richard Feynman could not only do physics brilliantly but also brought it alive with words.
So when someone tells you something is too complex for you to understand, the usual reason is that they do not really understand it themselves. Sometimes they know that they do not really understand it: often they do not.
For the inquisitive intellectual, few people are as irritating as those whose combination of ignorance and arrogance is so profound that they claim to understand things they do not even know they do not know.
The world of business and finance, which values confidence and certainty, is full of such people. "It isn't really like that," they will say; and when you ask what it is really like, they will tell you it is too complicated for you to apprehend. What they really mean, but do not recognise, is that it is too complicated for them to apprehend.
The bad financier, or businessman, like the bad scientist, pursues complexity almost wilfully because he believes such complexity demonstrates his knowledge and sophistication. So the blind lead the blind through the mysteries of structured financial products and the jargon-ridden thickets of corporate strategy. People sell securities whose properties they only dimly appreciate to people who do not understand them at all. Consultants describe the business world in language – and, of course, PowerPoint presentations – whose elaboration disguises the banality of the thought.
Real understanding lies in finding simplifications that bring order to disparate facts. Such was the nature of Rutherford's discovery and of his understanding; and why he felt able to reveal his findings to the Manchester Library and Philosophical Society. But Rutherford's task was easier in one important sense: the world he laboured to make sense of was unchanging and unaffected by our understanding, if not necessarily our observation, of it. The same is not true of business and finance.
Some patterns become apparent only with hindsight. David Hackett Fischer wrote of "the historian's fallacy" – the explanation of the behaviour of participants in the light of later knowledge. Perhaps Henry Ford and Bill Gates were the men who really understood the automobile and computer industries, or perhaps they were just the people whose opinions turned out to be right, which is not the same at all.
People in the middle of events often know less about them than those watching from the outside, which is why interviews with senior business figures inform us about what these people think rather than what is happening. The panels of grandees at Davos who pronounce on the future of the world may know less about the subject than spectators on the lower slopes. After all, it was the observer Rutherford, not the nucleus itself, who told those Manchester businessmen what the atom was really like.

What makes a good teacher?

 

Many state pupils are badly taught because the training system tries to make every class the same, says Katharine Birbalsingh

'Good teachers get extremely frustrated with the parrot-like approach dictated by Ofsted inspectors,' says Birbalsingh  Photo: JANE MINGAY

By Katharine Birbalsingh 7:39PM GMT 31 Jan 2011

52 Comments

Recently, I visited one of our top public boys' schools and sat in on a few lessons. I found exactly what I was expecting: old-fashioned teaching centred on knowledge instead of skills, with the teacher at the front and children at their desks; no group work nor games, just listening, responding and serious concentration. These teachers had not been moulded into what those of us in the state schools sector understand to be a good teacher.

My recent visits to private schools have me questioning my very understanding of the term "teaching". What is it, after all, that makes a good teacher? With cuts to teacher-training places being planned by the Government, as The Daily Telegraph reported yesterday, now is a good moment to ask what exactly we want our teachers to be trained in.

Training institutions are charged with the task of shaping teachers who will be "outstanding" or "good", according to Ofsted criteria. There are certain formulae. One must begin the lesson with a "starter", to last no more than
4-5 minutes. One must end with a plenary, summing up the lesson, again to last no more than 4-5 minutes. There must be an objective to the lesson, written up on the board, that in many classrooms children will copy into their books. With some bottom sets, this simple act of copying a long objective might waste up to 10 minutes of the 40 or 50-minute lesson. No matter, to be a good teacher in the state sector, one must do as one is told.

Be sure to use the interactive whiteboard in the lesson, of course. One is constantly reminded that "use of technology" will increase results. Funny, then, how the boys in our top public schools make do with only a handful of interactive whiteboards, which, by their teachers' own admission, are "hardly ever used".

One must remember that one isn't a "teacher" in a state school classroom. Instead, one is a "facilitator of learning". One doesn't teach knowledge, one teaches skills. So standing in front of the class and actually teaching is frowned upon. Far better to set the children up in groups, give them envelopes filled with bits of paper and ask them to put the pieces of paper in the correct order. Then, the facilitator of learning can roam around the classroom, facilitating instead of teaching, and guiding pupils through the maze of "personalised" and "independent" learning.

I know of one school where facilitating is such a rage that they combine classes, so that 60 children are in any given lesson, with two different teachers, one at the front who can teach, while the other moves among the children. What good an extra teacher is going to be (if they ever manage to reach you) when one is learning maths is beyond me. There are 59 other pupils, after all, in the class. The fact that half the class can barely hear the teacher at the front because there is too much noise, and some of them are just too far away, means nothing when set against the supposed value of the "facilitator".
The problem with teacher-training institutions is that they are all singing from the same hymn sheet. The philosophy that underpins state education is that we are in the business of pursuing equality, not excellence. The role of the school is to ensure that we give children equal opportunity. I, for one, would agree with this noble aspiration. I want children to have exactly this, and it is precisely because I can see that equal opportunity is not being provided to our poorest and most disadvantaged that I spoke out at the Conservative Party conference last year.
The irony is that if one does not pursue excellence, one cannot provide equal opportunity. But somehow, our understanding of "equal opportunity" has metamorphosed into "sameness". So rather than allow our teachers to be excellent in their different and innovative ways, some teacher-training institutions and some schools attempt to squash all ingenuity out of teachers, and make them into parrot-like machines churning out whatever skill-based nonsense they have been brainwashed with.
As I sat in on these lessons in one of our top public schools, I was struck by the fact that if I had been grading them according to Ofsted criteria – the standards by which we judge state school teachers – these public school teachers would have failed outright.
No teacher in the state sector would dare to teach the way they did. Yet the children were so well taught that they seemed to know everything about the subject. I sat in on one history lesson in which the pupils learnt more than their contemporaries in the state sector would learn in an entire term.
And if that sounds as though I'm making it up, imagine the time it takes to get children huddled around in groups, quieten them down, give instructions on how to do the complicated exercise of not losing the bits of paper, making sure they don't get bent out of shape, ensuring they get returned to the envelope, and so on.
So what is the best way of training teachers? Teach First is an organisation that takes the brightest from Oxford and Cambridge and has them teach for a minimum of two years. A number stay permanently. Some question Teach First and say that academic excellence is not necessarily a sign that one will be an excellent teacher. True, but one cannot be an excellent teacher without brains. Intelligence is a pre-requisite to being a good teacher. Often, but not always, academic excellence demonstrates that one is sharp. So Teach First is a fantastic way of getting our brightest into classrooms.
Above all, the question that needs answering is whether there is a right way and a wrong way to be a good teacher. Can one still be a good teacher if one never has the prescribed model of a starter, plenary, objective, group work, facilitation and so on? Are there really formulae for being "good"? Certainly, the teacher-training institutions would say that there are, which would explain why they believe it is so crucial that we retain them to ensure a guiding hand over teacher training.
The fear, it would seem, is that leaving training to schools might create too much variety in the profession, putting an end to the pursuit of "sameness" in the classroom. But I would argue that variety is the thing that will ensure equal opportunities for all.
The problem is that good teachers want the freedom to teach as they please. They want to do what is best for their pupils. Every class is unique, so every class needs a different approach and teaching style.
Good teachers often get extremely frustrated with the parrot-like approach dictated by Ofsted inspectors and senior leaders. Sometimes they get so annoyed that they defect to the private sector, where freedom is abundant.
Many times, as a senior teacher, I would observe excellent practitioners who were superb with pupils but I would be forced to give them a "good" instead of an "outstanding" for their lesson, simply because some ill-thought-out Ofsted boxes had not been ticked.
And there you have it. If one is to judge teachers by criteria, the list begins in teacher-training institutions, and is confirmed and justified in the end by Ofsted. The teachers who are caught in between are puppets, doing what they are told. That, at any rate, is what we see. In reality, the best teachers do their own thing behind closed classroom doors. They do precisely what they are told not to do and dare to teach knowledge instead of skills, dare to stand in front of the class "teaching" for more than five minutes, and don't insist on their children copying down an objective for the lesson. Then, when they are observed, they put on an act to satisfy the Ofsted criteria, and live to teach another day.
Such is the reality of the state sector, where good teachers are under siege, having to pretend in order to get their rubber-stamp approval. Children are different from each other. Classrooms and schools vary immensely. That is why the freedom to choose what lesson is appropriate, what teacher might work best, what curriculum best suits, is so imperative if we are to provide equality of opportunity.
The public school boys who run Britain aren't doing so because they were all considered to be the same at school: they run Britain because their teachers had the freedom to choose and, perhaps in the end, that is what it is to be a good teacher.

 

If bar owners produced movies in Bollywood, the (top 10) titles will most likely be: 10. Seeta Aur Margarita 9. Corona Pyaar Hai 8. Soda Akbar 7. Rab Ne Pila Di Thodi 6. Rum Whiskey Se Kum Nahin 5. Rum De Basanti 4. Hum Tight Ho Chuke Sanam 3. Passed Out At Lokhandwala 2. Peg pia sardard lia And the award goes to 1. Jo Pilata Wohi Bartender

The war on moral hazard begins at home

 

By John Kay in the FT

Published: January 25 2011 20:41 | Last updated: January 25 2011 20:41

Northern Rock was a narrow bank, with only retail customers, and Northern Rock failed; Lehman Brothers was a pure investment bank, but Lehman too failed. The issues in financial reform are to do with the behaviour of businesses, not the structure of their industry.
Wrong. The point of structural reform of the banking system is not to prevent banks from failing. Regulators have neither the technical competence nor political authority to achieve that objective. Nor, even if they had such competence and authority, would the outcome be desirable. The degree of supervision and control would undermine management responsibility. Regulators would need to be able to block Royal Bank of Scotland's takeover of ABN Amro, halt Northern Rock's expansion, and fire Dick Fuld and his associates from Lehman – and that just for starters. The banking system that would emerge would be like nationalisation, only not as fast-moving.


The purpose of structural reform is to allow financial institutions to fail without imposing large costs on taxpayers, retail customers and the global economy. The moral hazard problem is more subtle than sometimes suggested. Banks do not think: "We can afford to take big risks because the government will help if things go wrong." The downside of failure for senior executives and boards is large even if it is not as large as it should be.
But senior executives and boards can reasonably think: "We can afford to run large counterparty exposures because the government will help if things go wrong." Experience has shown that they will generally be right to think that. The transfer of wholesale market counterparty risk from the market to the taxpayer is the central issue. It distorts competition, allows excessive risk-taking and imposes wholly unacceptable burdens on the public. The most powerful mechanism for controlling risk-taking is prudential supervision, not by regulators, but by the market itself.


These are the issues that Sir John Vickers, the head of the UK's independent banking commission, highlighted in his speech last Saturday. Universal banks argue, correctly, that separation of their retail and wholesale activities would raise funding costs. The numbers cited – several billion a year for each large universal bank – are probably exaggerated but the impact is large. These figures measure the value to the financial system of the reduction in counterparty risk that financial conglomerates enjoy from access to a large retail deposit base and the expectation of government support. They indicate the scale of the subsidy that depositors and taxpayers provide to wholesale trading.


It is sometimes tempting to think that guarantees that are not called upon do not cost anything, although this mistake is not one that banks themselves make. Guarantees, implicit or explicit, mostly do not cost anything. But when they do cost something, what they cost is usually a lot. The implicit guarantors of Fannie Mae and AIG – US taxpayers – have discovered that. Irish – and German – taxpayers are beginning to learn the same lesson.


It is not possible for one country, even the US, to impose restructuring of the global financial system on its own, and not sensible to try. A business such as HSBC or Standard Chartered, which operates globally, can migrate if its lead regulator imposes burdensome requirements. But the mobility of capital, and even headquarters, does not prevent unilateral action to protect domestic depositors and national taxpayers. The first object is achieved by insisting that domestic depositors' funds are ring-fenced, the second by insisting that government does not underwrite the wholesale market obligations of banks located within its borders.

That might lead banks to shop around in search of accommodating jurisdictions willing to underwrite their global activities. Such banks would be the corporate equivalent of the benefit scrounger posing as asylum seeker, and are likely to receive the welcome that such migrants receive as individuals.